DWS launches Global Inflation Buster fund

DWS – the retail investment arm of Deutsche Asset Management – has decidedly taken a contrarian route with its latest offer, an equity fund aimed at beating inflation at a time when most fund managers are underweight in equities investment assets.

"It's an opportune time to launch such a fund after substantial declines in equities markets by more than 20 percent. We don't know where the bottom is at the moment, but we are not far from it. The question is not if but when will it happen (rebound from the bottom)" says Bill Barbour, director and investment specialist for DWS Investments.

He adds, "We have not seen such low stock valuations in 20 years. Who knows? We may see returns of 20% to 30% over the next few years. The time to invest is to act contrary from the herd. At this time last year, everyone wants to pile in when equities were at its peak."

Barbour also points out the last two decades had been unusual in that the global economy was able to sustain a prolonged period of disinflation amid strong growth, which was made possible because of the low costs of goods produced in China.

"But the genie is now out of the bottle and we are moving from disinflation to inflation. There is now a huge secular force for change in the world, one than is bigger than two and a half million Americans losing their homes."

"We are going to see huge rise in demand for consumer goods and average food intake from consumers in India and China. They want what we have and this will drive up prices pf steel, minerals, wheat and other commodities and consumer goods," Barbour notes.

While the new DWS fund is benchmark independent in its make-up, it aims to outperform the MSCI All Countries Index by 3% to 5% over a two to three-year horizon.

Called the DWS Global Inflation Buster, it will invest in a portfolio of 90 to 110 global companies that possess strong market share, resilience in both bargaining and pricing power as well as the ability to take advantage of positive regulatory environments.

Explains the fund's lead portfolio manager Andrew Tan, "DWS's three-pronged strategy centres on identifying and capitalising on investment opportunities that are categorised as defensive, growth and tactical."

"Companies which have access to scarce resources that may potentially increase in price are considered defensive plays. Examples would be Brazilian energy company, Petrobras; Canadian mining giant Goldcorp and Swiss agribusiness company, Syngenta, which is a leader in sales of seeds, fertilisers and products for crop protection."

"With growth opportunities, we invest in companies that are driven by strong domestic consumption and infrastructure development which includes European luxury goods maker LVMH; construction conglomerate, L&T of India and pharmaceutical giant, Roche."

"For our tactical plays, we look out for companies with robust cash flow, good gearing levels, strong market positioning, characteristics that are poised to do well in an inflationary environment. One example would be (Australian communications company) Telstra which has a good debt profile and cash dividend yield of more than 6 percent," Tan adds.

He also notes that there are a number of top-tier energy companies with price earnings multiples of less than nine times for the current year, some of which are offering cash dividend yields of more than 4 percent. "At nine times PE, this implies an oil price at less than US$90 a barrel," says Tan.

For its launch, the DWS Global Inflation Buster is expected to be overweight in energy, minerals and telecom stocks and underweight in banks, insurance companies and technology companies. It will hold no more than 10% in cash.

For a limited time from now till 8 August 2008, the fund can be purchased at a launch price of S$1 or US$10 per unit. An initial investment starts from S$1,000 or US$1,000.

The DWS Global Inflation Buster is available from distributors including ABN AMRO Bank, Fundsupermart.com, Phillip Securities, Finatiq, iFAST Financial and Navigator.


By A J Leow

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